If you’ve ever driven through Manhattan during rush hour, you know the drill: honking horns, endless idling, and the creeping frustration of moving at a snail’s pace. Traffic in New York is among the worst in the world, costing $9 billion a year. New York City’s traffic is its bloodstream — but the veins are clogged.

After years of wrangling, millions in infrastructure investments, and promises to tackle gridlock, the city’s congestion pricing plan is finally set to kick into action on January 5th, 2025. Most cars looking to go below Manhattan’s 60th street will have to pay $9 per day, while larger trucks and tourist buses will pay $21.6.

But is it a good idea?

The goal of congestion pricing is simple: reduce the number of vehicles to ease gridlock and improve air quality. Drivers entering the Central Business District (CBD) during peak hours would pay a fee. Authorities estimate a $15 billion revenue that would support public transit and critical transit repairs for the city.

The move is groundbreaking for the US, but it's not a global premiere. Singapore was the first country to introduce congestion pricing on its urban roads in 1975, refining it in subsequent years. London also has one of the most impactful congestion taxes in the world, which was largely hailed as a success. Pioneered in 2003, the tax raises around £229 million ($290 million) a year and reduces traffic not just in the charge area, but also in the suburbs. A 2024 study found that the charge had a progressive impact, being most beneficial for low-skill commuters who benefitted from less traffic.

Of course, New York is not London, nor is it Singapore.

The good, the bad, and the ugly

New York City has its own type of infrastructure, road layout, and population. Is NYC's congestion tax really a good idea?

“I think the city is on the right track,” says Michael Ostrovsky, a professor of economics at Stanford. “It’s the least bad of all the possible solutions that we have.”

The case for a congestion tax is straightforward: you aim to reduce traffic in town and make some money to fund public transit and repair roads. The case against is also pretty direct: people are rarely happy when they're charged for something, especially something like driving, which is often treated as a god-given right.

Many residents of neighboring Brooklyn and Queens opposed the congestion pricing proposal because they would be forced to pay a toll to drive through Manhattan. Various city stakeholders opposed the tax, saying jobs were at stake due to this tax, and occasionally even going to court. At least eight lawsuits are ongoing against the congestion tax.

This also happened in London. There was a great deal of pushback against the measure, but gradually opposition decreased, and the tax became more and more popular. In fact, public favor grew in nearly all cities as people adapted to the policy.

In NYC, the picture right now is less clear.

Two Pew Research studies conducted in 2018 and 2019 showed that a majority of many demographic groups, in all geographic areas, endorsed congestion pricing. People seemed to be embracing the policy, but Republican sentiment was strongly against it. Recent polls suggest more New Yorkers may be more against the tax than before, but during public consultations, comments were overwhelmingly supportive of the policy.

For economists, however, the question isn't about whether to apply the tax or not, it's how to do it.

The economists' view

The tax only applies to private cars, and that's a big problem for Ostrovsky because it's unfair.

Imagine two people heading into Manhattan: a nurse commuting from Queens in her personal car and a business executive taking a cab from LaGuardia Airport. Under the proposed system, the nurse would pay $9 per day — a hefty price for someone with limited public transit options. The executive? Just $1.25 per trip (the cost for taxis).

Then there are delivery trucks, which frequently enter the CBD before 5 a.m. to dodge peak-hour fees. Once inside, they contribute to traffic all day long. Despite causing far more congestion than a single car, these trucks would pay only a reduced off-peak fee.

This uneven distribution of costs isn’t just unfair; it’s ineffective. Private cars are only a fraction of the problem. Exempting taxis, ride-hailing services, and delivery trucks means the plan would barely dent overall congestion.

Ostrovsky and Frank Yang, a recent PhD graduate, have a different idea. They suggest that first, delivery vehicles, taxis, and ride-hailing services should be charged a fee based on distance traveled rather than a one-time toll. This would represent a far better measure of congestion and could generate $1.6 billion per year — significantly more than the $1.3 billion expected from the original plan. These vehicles already track their mileage so it shouldn't be too challenging to implement.

The researchers also suggest implementing a no-charge policy for off-peak travel. There’s no need to penalize someone taking a late-night Uber home from a bar, for instance.

Then, there's the rideshare problem.

Rideshares and treating cars equally

London knows its rideshare issue very well. Initially, the UK's capital only charged private cars. However, the rise of taxi usage and rideshares like Uber brought congestion right back up. In 2019, London decided to also include taxis and rideshares in the congestion tax, ending their exemption.

In that sense, it's a bit strange that New York isn't considering this issue. Ostrovsky and Yang calculate that they should also pay, just slightly less than regular drivers. Instead of $1.25 or $2.50, these vehicles should pay around $7.50 per trip — comparable to the $9 per-trip cost for personal cars. After all, the congestion you're causing is the same regardless of whether you're driving your own car or Ubering.

This would be a blow for taxi drivers, who were actually expecting an increase in income following this tax. To soften the blow, the researchers suggest compensating them with fixed payments, funded by the new fees. Delivery companies could benefit from incentives to shift operations to off-peak hours. No tolls at night would also incentivize people to take a taxi after going out.

“We really want to make sure these higher tolls only apply when it’s necessary,” Ostrovsky says.

The two economists say they were able to pinpoint these things only because New York City keeps clear data on traffic and car trips and makes it accessible. The two emphasize that the rollout of the congestion tax is definitely a step in the right direction, but hope that the city will incorporate aspects from their solution as well.

Congestion pricing isn’t just about New York. Cities across the U.S. are watching closely. If New York gets it right, it could set a template for Los Angeles, San Francisco, and Boston. If it fails, congestion pricing might be dead in the water for years to come.

New York City has an opportunity to lead, not just for its own streets but for congested cities everywhere. If it gets things right, the gridlock nightmare could finally ease. And the city could breathe again.